Business loans are borrowed during emergencies and you have a lot of things at stake. If you fail to pay the loan on time then you won’t be able to acquire any other capitals or credits until you have repaid your previous loan. Which can be detrimental to any business. There are also additional legal problems that will follow the loan procedure which can eventually harm your reputation in the market. That is why it is important for you to keep repaying the instalments of your business loans on time. If possible you can request the bank to extend your tenure but you shouldn’t do anything without informing the lender.
Here are a few tips that will help you repay your business loans easily.
- Budget: You should have a proper budget estimation calculated on a spreadsheet or other methods of budgeting software. Which will let you review the cash flow easily. With the help of such a method, you will be able to understand the amount of money flowing in and out of your business. The reason for the cash shortage can be easily detected. Current assets and liabilities of the working capital are extremely essential and if it is below average then you are pushing to stay in the business market. To avoid such extreme conditions of debts you need to modify your budget and try to maximize the collections and minimize the expenditures.
- Maximize the Collections: There are ways to maximize the collections, first of all, you should begin with acquiring the due payments from your customers as quickly as possible. If possible negotiate with them so that they will pay in advance or during the exact date of payment. Another step is merchant cash advance: in this case, you receive the cash as a remittance before the job. Inventory can be auctioned through a wholesale procedure, and superfluous equipment should be liquidated to acquire the quick collection. If your business develops products or sales services that are paid according to units or hourly basis then you can work extra hours. Another thing can be done in case your company develops products with price elasticity, you can increase the price of products for the time being without the loss of any sales. You can also sell equity shares to new investors but that is a big step and should only be taken during disastrous conditions.
- Minimize the expenditures: First of all, you need to assess your budget plan to understand the cash flow and how to minimize it. Begin with negotiating with your suppliers and enquire about the terms to extend the tenure. If this doesn’t go well try to replace them. Avoid spending money in general, cut down on employee’s overtimes, push back schedules for non-essential deliveries. But never compromise with critical payments, your business loans should be your priority, to keep the company afloat.
- Negotiate and Converse with the lenders: Business is always unstable and cash flow is never constant here, understanding this is your first task. Then converse with the lender, while requesting a loan you should negotiate with them for the settlement of instalments to be under favourable terms. Try to have an extended tenure, so that even if you can pay before time but you will still have options. If you are nearing the end of business loans tenure then talk to your lender about and extension, and if possible ask if you can pay in smaller amounts each month.
Always make contingency plans beforehand, have some saving so that your company doesn’t go bankrupt due to some business loans. Try to be on good terms with the lender and if you are not taking a loan from the bank then try to find a trustworthy lender who offers you business loans according to your needs. If possible make the monthly or yearly instalments automatic from your account, so you don’t have to keep track of it regularly.